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Inflation About to Spike? Oil, CPI & Private Credit Warning Signs · The Financial Exchange Show

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Speaker 1: making a donation today. This is the Financial Exchange with
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Speaker 1: Chuck Zada and Paul.
1:06
Speaker 2: Lane Chuck Paul a Sucker with you here as we
1:15
Speaker 2: continue through the week and trading today, pretty calm on
1:20
Speaker 2: the surface, quite honestly, Like there's not too much that's
1:24
Speaker 2: that's rocking the boat in equity land right now. The
1:27
Speaker 2: S and P is up three points, not worth getting
1:30
Speaker 2: out of bed for dows off two hundred and thirty
1:32
Speaker 2: seven points. It's half a percent at least, Like you know,
1:35
Speaker 2: you got some use out of your clothes now as
1:38
Speaker 2: that can posit up seventy points thirty percent, okay, like
1:40
Speaker 2: you got a little bit of movement, but again, like
1:42
Speaker 2: into Caesar, mixed and not really telling you anything conclusive.
1:46
Speaker 2: What is not mixed right now? Bond's tenure Treasury selling
1:49
Speaker 2: off a six point four basis points back up to
1:51
Speaker 2: four point two percent today, So bonds continuing, yields, yields
1:56
Speaker 2: continuing to march higher over the last week or two.
2:00
Speaker 2: We've got the dollar index up zero point two nine
2:03
Speaker 2: percent to ninety nine and ten, and we've got gold
2:06
Speaker 2: off forty five dollars announced to fifty one ninety seven
2:09
Speaker 2: and ten cents. Crude oil West Texas Intermediate again kind
2:13
Speaker 2: of just whipsong here back up about two seventy eight
2:16
Speaker 2: a barrel right now to eighty six twenty three the
2:18
Speaker 2: tripa national average four Gas prices up another four I'm sorry,
2:22
Speaker 2: three point nine cents overnight to three fifty seven and
2:26
Speaker 2: eight tenths from three fifty three and nine tenths, and
2:30
Speaker 2: so you're now about sixty almost seventy cents above where
2:35
Speaker 2: you were a month ago. So you've seen a move
2:38
Speaker 2: from that two eighty five to two ninety five range
2:40
Speaker 2: into the high three fifties. Uh. This move from oil today,
2:44
Speaker 2: if it holds, likely pushes the national average above three
2:47
Speaker 2: sixty tomorrow and we'll see where we go from there.
2:52
Speaker 2: So that is what is moving in markets. We did
2:57
Speaker 2: get a CPI report this morning. I know that basically
3:02
Speaker 2: no one really cares about it because trying to measure
3:06
Speaker 2: inflation before the straight up forom moves is disrupted is
3:10
Speaker 2: kind of like trying to well, I don't really have
3:15
Speaker 2: any comparison for it, but it's like, it doesn't matter
3:19
Speaker 2: what inflation was in February. Put in the car before
3:21
Speaker 2: the horse the world. The world is different now than
3:23
Speaker 2: it was in February. Here's what we did see. Inflation
3:26
Speaker 2: came in in line with expectations point three percent headline,
3:30
Speaker 2: point two percent core for the year. We're now at
3:33
Speaker 2: two point four percent on the headline, two point five
3:36
Speaker 2: percent on the core. Here's why this doesn't matter, Paul,
3:39
Speaker 2: off the top of your head, do you know the
3:42
Speaker 2: waiting that gasoline has in the CPI.
3:46
Speaker 3: Three or four percent?
3:48
Speaker 2: Two point eight very good outstanding? Look at that belie
3:51
Speaker 2: better than the garlic.
3:54
Speaker 3: It's closer to my cour garlic.
3:56
Speaker 2: Is this garlic is forty eight percent index? Is it not?
4:02
Speaker 3: Uh?
4:02
Speaker 1: So?
4:03
Speaker 2: In any case, here's why this matters, uh CPI. So again,
4:07
Speaker 2: gas is two point eight percent of CPI Gas prices
4:11
Speaker 2: were right now in the week where they start measuring
4:14
Speaker 2: gas prices for the March CPI. And so what this
4:18
Speaker 2: means is basically, they're going to go around to the
4:20
Speaker 2: same station as they went to the last time, or
4:22
Speaker 2: try to and look at the signs and write it down.
4:25
Speaker 2: This is literally how they do it for gas, and
4:28
Speaker 2: they're gonna say, Okay, here it was, and here's what
4:30
Speaker 2: it was. You know last month and og there was
4:33
Speaker 2: about a twenty five percent bump in the price of
4:35
Speaker 2: gas over the last month, not quite that high. It's
4:37
Speaker 2: I think it's about twenty three percent right now, but
4:41
Speaker 2: that's you know, what we're what we're looking at. Again,
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Speaker 2: just think about this in terms of how CPI works.
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Speaker 2: You are going to take that difference, multiply it by
4:50
Speaker 2: the waiting, and that means that gasoline alone is going
4:52
Speaker 2: to add point six percent to CPI for March, or
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Speaker 2: somewhere in that ballpark. I wouldn't be surprised. I's anywhere
4:58
Speaker 2: between point five and points evan, just depending on the
5:01
Speaker 2: exact survey methodology and timing. With prices moving as quickly
5:05
Speaker 2: as they are, there's literally a difference between measuring on
5:08
Speaker 2: Monday and measuring on Wednesday.
5:09
Speaker 3: It definitely is.
5:10
Speaker 2: So assuming everything else stays the same, you're probably going
5:15
Speaker 2: to get a March CPI reading somewhere in the point
5:21
Speaker 2: seven to point nine range is kind of where you
5:24
Speaker 2: are just for that single month.
5:25
Speaker 3: And we were just at point three for the month
5:27
Speaker 3: of February correct text.
5:29
Speaker 2: So this again, then you look at your base effects
5:31
Speaker 2: and you say, okay, based on where we were last year,
5:33
Speaker 2: what does that replace. It's likely going to kick both
5:36
Speaker 2: core and headline, you know up meaningfully. The headline you
5:40
Speaker 2: know far more, just because again, core doesn't have food
5:42
Speaker 2: and fuel directly, but there's going to be pass throughs
5:45
Speaker 2: into things like airfares and stuff like that that are
5:48
Speaker 2: moving up as a result of higher jet fuel prices,
5:51
Speaker 2: and so ultimately you know you're going to see a
5:55
Speaker 2: move up on the inflation side. What's going to matter
5:58
Speaker 2: in all of this is how long does any disruption
6:03
Speaker 2: to hormus last, right, and again, worldwide, what you are
6:08
Speaker 2: going to start seeing if this goes on too much
6:11
Speaker 2: longer are shortages. You're not going to have the stuff
6:15
Speaker 2: that you need in order to make your economy work.
6:19
Speaker 2: If you are in Thailand or Pakistan. This is like,
6:22
Speaker 2: this is why I think the I think it was
6:23
Speaker 2: the Taiwanese government yesterday put out a bolt and being like, hey,
6:27
Speaker 2: you guys gotta start carpooling and stuff like that. Take
6:30
Speaker 2: the stairs, don't use the elevator. Like this is like
6:32
Speaker 2: where they are right now because they see that there
6:35
Speaker 2: are no LNG ships from Qatar that are coming to
6:38
Speaker 2: help them. So in the United States, I really doubt
6:43
Speaker 2: that you're going to see outright shortages. I don't think
6:46
Speaker 2: that that is in the cards unless you get to
6:48
Speaker 2: some like really nasty scenarios which I just don't think
6:51
Speaker 2: are very likely.
6:52
Speaker 3: Tucker, can you pick me up for work? I'm right
6:54
Speaker 3: on your way. Yeah, you're on my way. Yeah, no problem.
6:57
Speaker 2: So I think in the US, though, higher prices is
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Speaker 2: what we are going to see, and it's gonna filter
7:02
Speaker 2: into all kinds of areas. The stuff that we're seeing
7:05
Speaker 2: right now is gas. But remember one of the major
7:08
Speaker 2: exports that comes through Hormuz is fertilizer, and so you
7:13
Speaker 2: are likely not likely, you're already seeing fertilizer prices having
7:16
Speaker 2: jumped twenty five to thirty percent. And this means that, hey,
7:20
Speaker 2: if you are a farmer that's you know, doing your
7:22
Speaker 2: spring planting, you're now saying, Okay, what do I need
7:25
Speaker 2: to sell at in order to make this, you know,
7:27
Speaker 2: the dollars make sense. Remember it's not fertilizer up twenty five,
7:33
Speaker 2: food up twenty five, because fertilizer's only one input into
7:37
Speaker 2: you know, the process of actually, you know, farming. But
7:40
Speaker 2: it might be, Hey, fertilizers up twenty five, and so
7:43
Speaker 2: I've got to raise my prices four or five percent
7:46
Speaker 2: this year instead of the one or two I was
7:47
Speaker 2: going to and that seeps into inflation as.
7:50
Speaker 3: We go through the year.
7:52
Speaker 2: Ultimately, I think it's pretty likely that we are looking
7:55
Speaker 2: for inflation to elevate, you know, at a bare minimum
8:00
Speaker 2: north of three percent for the next eighteen months, very
8:03
Speaker 2: possibly somewhere between four and five percent for the next
8:05
Speaker 2: twenty four months, and in your bad cases, you know,
8:09
Speaker 2: you get inflation going up north of six but I
8:12
Speaker 2: don't really think that you get there based on what
8:14
Speaker 2: we know right now. But expect inflation to pick up
8:19
Speaker 2: not just in fuel but into other areas of the
8:23
Speaker 2: economy as well, because a lot of them have imput
8:26
Speaker 2: costs where fuels are a major one.
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Speaker 3: Yeah, I mean, I'm sure inflation will will pick up
8:31
Speaker 3: as a result of this, But it's just so hard
8:32
Speaker 3: when the variable on the other side could be resolved
8:35
Speaker 3: within a matter of days or you know, hours, or
8:39
Speaker 3: it's just that is the part that makes it trickier.
8:41
Speaker 3: And I get that even if the issue was resolved,
8:45
Speaker 3: then we have to go through what has resolved really
8:47
Speaker 3: look like. So there're just is a trend as uncertainty
8:50
Speaker 3: on that other variable. But certainly next next report that
8:54
Speaker 3: we get for the month of March is going to
8:56
Speaker 3: be more significant in terms of increases we know that
8:59
Speaker 3: from what we've seen over the last week or so.
9:01
Speaker 3: And I think it's such a good point that you
9:03
Speaker 3: hit on to emphasize that we are most focused on
9:06
Speaker 3: oil and gas. It's so transparent, it's right in our face.
9:10
Speaker 3: You're looking at the pump every single day driving to work.
9:13
Speaker 3: But there was a great piece in the New York
9:14
Speaker 3: Times here that talks about some of the add on
9:16
Speaker 3: effects in other areas, and you mentioned fertilizer and just
9:20
Speaker 3: all these other items like aluminum and items that you
9:24
Speaker 3: or I if we were talking, and helium, which I
9:26
Speaker 3: only think of the balloons, But they make a great
9:28
Speaker 3: point in this New York Times speech that no, that's
9:31
Speaker 3: important for semiconductors in other areas, it is a much
9:35
Speaker 3: more broader impact. It truly is a global economy when
9:39
Speaker 3: you analyze issues like this that have knockoff effects that
9:42
Speaker 3: go way beyond just Hey, am I paying three pot
9:45
Speaker 3: fifty a gallon today? And it was you know, two
9:47
Speaker 3: seventy five before.
9:48
Speaker 2: To give you an idea on the helium side of things.
9:51
Speaker 2: Helium not just used for kids balloons, as you mentioned, not.
9:54
Speaker 3: Just for good times at parties.
9:55
Speaker 2: It is big in semiconductor manufacturing. And when you look
9:59
Speaker 2: at Korean they import a ton of their helium from
10:03
Speaker 2: the Persian Gulf because it's produced as part of well
10:08
Speaker 2: something I don't really know, but they import a lot
10:10
Speaker 2: from there. I don't know where the helium comes from,
10:13
Speaker 2: but it comes from there. I know that much. In
10:16
Speaker 2: any case, if you have disruptions to that supply, the
10:20
Speaker 2: question that is out there is, hey, can your foundriies
10:24
Speaker 2: operate and can you produce the chips that are needed?
10:28
Speaker 2: And the answer is no, you can't. Very like this
10:32
Speaker 2: is binary. You can't operate a foundry without helium. There's
10:37
Speaker 2: no replacement. You can't just be like, oh, well let's
10:40
Speaker 2: use you know, hydrogen instead. No, Like then your foundry
10:42
Speaker 2: blows up and you probably don't have any chips. You
10:44
Speaker 2: can't use oxygen, you can't use you know, cobalt, and
10:48
Speaker 2: you can't use tunea fish and like all this stuff
10:51
Speaker 2: you can't use as replacement for helium because these very complex,
10:56
Speaker 2: precise machines are designed to use helium in very specific ways.
11:00
Speaker 3: And I don't want to go too far down this
11:01
Speaker 3: rabbit hole, but that for the global economy would spell
11:05
Speaker 3: And we're talking about a couple knockoff effects here, knock
11:07
Speaker 3: on effects here, But to not have the semiconductor manufacturing
11:11
Speaker 3: supply chain going at full speed would be a huge
11:16
Speaker 3: global impact from a it is really dire. It would
11:20
Speaker 3: be extremely dire. I mean because we I don't think
11:22
Speaker 3: everyone fully appreciates how critical what Taiwan semiconductor and the
11:27
Speaker 3: concentration of semiconductor manufacturers, how it influences basically everything in
11:32
Speaker 3: our in our day to day. And again we're going
11:34
Speaker 3: further down the road here, but it's significant.
11:37
Speaker 2: It's one where quite honestly, if you remain in this situation,
11:42
Speaker 2: for if we're still here on Sinco Demayo and harm
11:48
Speaker 2: Moves is blocked, you've almost guaranteed global recession. Now the
11:56
Speaker 2: US again is going to be insulated in some very
11:59
Speaker 2: specific ways because of you know, the natural resources we
12:01
Speaker 2: have and what we produce. But Asia is in deep
12:06
Speaker 2: crap at that point, and Europe is not much better.
12:10
Speaker 2: But again, that's that's a lot of economy to try
12:13
Speaker 2: to put on the backs of the United States. So
12:17
Speaker 2: we'll see where things go again, maybe you get some
12:19
Speaker 2: kind of improvement over the next week or two, maybe don't,
12:22
Speaker 2: like I don't know, but Sinco Demayo is my line
12:27
Speaker 2: in the sand, which is, hey, if there's no improvement
12:30
Speaker 2: by then.
12:31
Speaker 3: Far at the tequila.
12:32
Speaker 2: Like the things are like have ad it voice, like
12:37
Speaker 2: go for It's take a quick break here. When we
12:40
Speaker 2: come back, we've got trivia, and then we're all gonna
12:45
Speaker 2: be really thankful for the super rich after this, because
12:49
Speaker 2: without them, where would the American economy be.
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Speaker 2: So the economist has a piece here where the actual
14:20
Speaker 2: text in here is a little bit better than the headline,
14:24
Speaker 2: which is would America be in recession without the super rich?
14:33
Speaker 3: Oh?
14:33
Speaker 2: Thank you bay and asked for saving the economy?
14:38
Speaker 3: How can we ever buy you? Yeah?
14:43
Speaker 2: Like so yeah, Like the headline comes off that way,
14:46
Speaker 2: and the piece is modestly better, which is basically, hey,
14:51
Speaker 2: the bottom like four quintiles of the US economy aren't
14:55
Speaker 2: really doing well and aren't really spending much, but the
14:59
Speaker 2: very wealthy is, you know, continuing to spend. And you've
15:04
Speaker 2: seen acceleration in spending in the top income groups relative
15:07
Speaker 2: to the bottom ones in the last couple of years,
15:10
Speaker 2: which again still doesn't really answer the question of like,
15:12
Speaker 2: would the US economy be in recession or not, but
15:15
Speaker 2: it certainly shows that, you know, a lot of the
15:17
Speaker 2: spending growth is being driven by it.
15:19
Speaker 3: Yeah, this this piece kind of tries to poke at
15:22
Speaker 3: that a little bit. I mean, I think the common
15:24
Speaker 3: sort of cocktail dinner conversation chatter that you can use
15:28
Speaker 3: is that And we've quoted a lot on the program
15:30
Speaker 3: to myself personally, that the top ten percent of income
15:33
Speaker 3: earners in the United States account for half the spending.
15:35
Speaker 3: That was something that came from Moody's. And what this
15:37
Speaker 3: piece in The Economist does is try to perhaps maybe
15:41
Speaker 3: pokes holes in that not this idea that the ultra
15:44
Speaker 3: wealthy aren't helpful for the economy. But basically what they
15:47
Speaker 3: do is they make this this other counter argument too,
15:50
Speaker 3: where they say Barclays has done an analysis that is
15:53
Speaker 3: more predicated on data from the Bureau of Labor Statistics
15:57
Speaker 3: in terms of what consumers report that they spend, so
16:01
Speaker 3: actually hard information from people versus the way that Moody's
16:06
Speaker 3: has put together. That figure that I just quoted before,
16:09
Speaker 3: of the top ten percents accounting for half of spending
16:12
Speaker 3: is more based on some modeling that they do that
16:14
Speaker 3: utilizes a lot of different assumptions in terms of allocation
16:18
Speaker 3: and asset wealth in different positions. And the dispute here
16:23
Speaker 3: by the economists is that no, actually, if you look
16:25
Speaker 3: at the Bureau of Labor Statistics data that a third
16:29
Speaker 3: of the higher income earners are sorry, the higher income owners,
16:33
Speaker 3: the top twenty percent are accounting for a third of
16:35
Speaker 3: spending and it's always kind of been like that for
16:37
Speaker 3: the last twenty years. I think it's a great conversation
16:40
Speaker 3: to have because ultimately my view would be it's probably
16:44
Speaker 3: somewhere in the middle. I don't think what the economists
16:46
Speaker 3: have laid out here is something that you should blindly
16:50
Speaker 3: believe that, no, it's the same. I do tend to
16:52
Speaker 3: believe that there is a shift where some of the
16:55
Speaker 3: higher income earners are more responsible than they were previously.
16:58
Speaker 3: What that percentagehift is that could be up for debate
17:01
Speaker 3: when you're doing all this modeling and forecasting, but indisputa ly,
17:05
Speaker 3: there is evidence from businesses out there. Whether we've looked
17:08
Speaker 3: at you know, hotel chains where you look at the
17:10
Speaker 3: premium versus sort of the the mid middle tier hotels
17:14
Speaker 3: out there, premium airfares versus you know, regular economy. There
17:19
Speaker 3: are indications out there that the wealthier consumer has been
17:23
Speaker 3: more resilient over the course of the past five or
17:25
Speaker 3: six years. But it's a fascinating conversation to have.
17:30
Speaker 2: So would America be in recession without the super rich?
17:36
Speaker 3: I think if you saw a significant this is where
17:39
Speaker 3: I am interested in, if you saw a significant hit
17:41
Speaker 3: to the market like we did in twenty two over
17:43
Speaker 3: the course of the next year or so. I do
17:45
Speaker 3: feel as if not necessarily, that this all equal drives
17:49
Speaker 3: into a recession if the hiringcome stop play. But I
17:52
Speaker 3: think it would have a more significant impact than I
17:54
Speaker 3: would have told you six or seven years ago.
17:57
Speaker 2: So there's two different ideas I think to separate there,
18:01
Speaker 2: which I think are interesting. One is the spending by
18:03
Speaker 2: the super rich, but the other is, hey, how much
18:06
Speaker 2: spending is driven by people investing very short term in
18:09
Speaker 2: markets who might not be super rich, but still like
18:12
Speaker 2: have enough wealth that like they can you know, kind
18:15
Speaker 2: of get additional spending.
18:18
Speaker 1: You know.
18:18
Speaker 2: The person I'm thinking of is that the one who has,
18:21
Speaker 2: you know, one hundred thousand dollars portfolio and got lucky
18:25
Speaker 2: winning on like an option bet one week and made
18:28
Speaker 2: ten grand and decides to spend five of it.
18:29
Speaker 3: Sure, and if.
18:31
Speaker 2: That start like if that starts breaking down because buying
18:35
Speaker 2: the dip starts breaking down, then how much spending comes
18:38
Speaker 2: out from that because again it's all anecdotal, but like
18:42
Speaker 2: you see these people on social media bragging about this stuff,
18:46
Speaker 2: and I have to imagine that it can go the
18:48
Speaker 2: other way as well.
18:49
Speaker 3: But even a longer term investor Chuck who's just sitting
18:51
Speaker 3: in the s and P five hundred, who has that
18:53
Speaker 3: one hundred thousand dollars portfolio that's gone up by you know,
18:56
Speaker 3: thirty forty percent over the last five years. Yeah, maybe
18:59
Speaker 3: they look at their proper and say, I'm gonna do
19:00
Speaker 3: that improvement. I'm going to do that renovation. But maybe
19:03
Speaker 3: it's the other way. Then they don't have the same
19:05
Speaker 3: psychological willingness to part with some of that money.
19:08
Speaker 2: Could be just like the parallel example right now is
19:16
Speaker 2: given what's happening overseas, what are we seeing Like one
19:19
Speaker 2: of the big beneficiaries from the last couple of years
19:22
Speaker 2: have been airlines with big boosted international travel. I'm curious
19:26
Speaker 2: to hear what they say about their like NFQ one bookings,
19:28
Speaker 2: Like is there a change in that because of any concerns.
19:31
Speaker 3: I don't know.
19:32
Speaker 2: Let's take a quick break. When we come back, Trivia
19:34
Speaker 2: Answer and Wall Street Watch.
19:41
Speaker 1: Bringing the latest financial news straight to your radio. Every day,
19:45
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:51
Speaker 1: Time out full Wall Street Watch tracking the stocks, the data,
19:55
Speaker 1: and the headlines driving markets so far today right here
19:58
Speaker 1: on the Financial Exchange Radio Network.
20:01
Speaker 4: Well, markets are pulling back now in negative territory after
20:05
Speaker 4: yesterday's wild session where traders witness a frenzy on the
20:10
Speaker 4: price of oil. Traders this morning are also reacting to
20:13
Speaker 4: February's Consumer Price Index for the latest gauge on inflation,
20:17
Speaker 4: which came in line with estimates. Right now, the Dow
20:20
Speaker 4: is down nine tenths of a percent, or four hundred
20:22
Speaker 4: and twenty two points. SMP five hundred is down three
20:26
Speaker 4: tenths of one percent to twenty one points. NASDAC is
20:29
Speaker 4: off about a tenth of a percent. Rustly two thousands
20:33
Speaker 4: down four tenths of a percent ten Your treasureil up
20:36
Speaker 4: seven basis points at four point two zero eight percent,
20:40
Speaker 4: and crude oil up four percent higher today trading right
20:44
Speaker 4: around eighty six dollars a barrel. This comes after the
20:47
Speaker 4: International Energy Agency agreed to tap four hundred million barrels
20:51
Speaker 4: of oil, marking its largest ever release. Meanwhile, Oracle shares
20:56
Speaker 4: are rallying ten percent after the cloud computing company raised
21:00
Speaker 4: it's fiscal twenty twenty seven revenue forecast, citing strong demand
21:03
Speaker 4: for AI in cloud computing. Sticking with tech, We're in
21:07
Speaker 4: Video announced this morning you'll invest in AI cloud company
21:10
Speaker 4: Nebuus Group, sending shares in Nebuus up by thirteen percent,
21:14
Speaker 4: while in Video stock is up by about a third
21:17
Speaker 4: of one percent. Elsewhere, food company Campbell's cut its outlook
21:21
Speaker 4: as weak demand for its snacks dragged sales shares and
21:24
Speaker 4: Campbell's sinking by nine percent. Nike shares are dipping after
21:29
Speaker 4: Barclays upgraded the athletic wear maker to overweight, and Sintas
21:33
Speaker 4: agreed to buy uniform supplier Universe Do a five and
21:36
Speaker 4: a half billion dollar deal. Uniforse shares are climbing by
21:39
Speaker 4: seven percent, while Sintas is up by two percent. I'm
21:43
Speaker 4: Tucker Silva and that is Wall Street Watching. In the
21:45
Speaker 4: previous segment, we asked you the trivia question, what year
21:48
Speaker 4: did Toyota introduce the Prius to the US. It'll be
21:53
Speaker 4: two thousand. Phil from Portland, Maine is our winner today,
21:56
Speaker 4: taking home a Financial Exchange Show tea. Sure Congress to Phil,
22:01
Speaker 4: and we played trivia every day here on the Financial
22:05
Speaker 4: Exchange See complete contest rules at Financial Exchange Show dot com.
22:10
Speaker 2: I was gonna guess ninety nine on that close. It
22:12
Speaker 2: would have been a year off. But hey, what are
22:16
Speaker 2: you gonna do? Do you remember the like talking about
22:19
Speaker 2: the original Prius. It was real ugly, just like a
22:23
Speaker 2: really ugly car. But do you remember the ugliest Toyota
22:27
Speaker 2: of the nineteen nineties.
22:29
Speaker 4: Oh, this start with an S or something.
22:32
Speaker 2: Nope, it starts with a P.
22:34
Speaker 1: I don't know.
22:36
Speaker 2: It was their original minivan, the Toyota Previa. It was
22:40
Speaker 2: the one that was shaped like an egg.
22:42
Speaker 4: Previa.
22:45
Speaker 2: Oh that thing, it was shaped like an egg.
22:48
Speaker 3: Oh oh okay.
22:50
Speaker 4: Oh yeah, my buddy had that in elementary school.
22:53
Speaker 2: Yeah, before they had the Siena.
22:55
Speaker 3: It was that one. That's a real ugly car.
22:59
Speaker 2: You're right, you know, like it's just like, oh, here's
23:01
Speaker 2: an egg driving down the road. Hope, Humpty dumpty doesn't
23:03
Speaker 2: fall like because zerre sixty and above, it doesn't go
23:06
Speaker 2: to sixty. No it this sphenometer only goes to fifty two.
23:11
Speaker 2: So let's talk a little bit about private credit, because
23:14
Speaker 2: every day there's another one to seven headlines about private
23:18
Speaker 2: credit that are just kind of gnarly and gross. This
23:22
Speaker 2: morning we have this JP Morgan restricts private credit lending
23:25
Speaker 2: after loan markdowns. So here is what JP Morgan is
23:30
Speaker 2: doing and what they're not What they're not doing is
23:32
Speaker 2: writing down the value of their own investments. They don't
23:35
Speaker 2: really have a private credit arm to the best of
23:37
Speaker 2: my knowledge. What they are doing is they have there
23:42
Speaker 2: are private credit funds that come to them. And one
23:45
Speaker 2: of the ways private credit funds make even more money
23:47
Speaker 2: when things are going well is they make loans using
23:50
Speaker 2: their own leverage. So it's they borrow money in order
23:53
Speaker 2: to lend money. It allows them to have a bigger
23:55
Speaker 2: pool of capital to work with them. It's no different
23:58
Speaker 2: from you don't buy real estate with just cash. You
24:01
Speaker 2: buy real estate by borrowing money and then you know,
24:03
Speaker 2: going out and doing what you do. So JP Morgan
24:07
Speaker 2: Chase is saying, Hey, we are going to restrict the
24:11
Speaker 2: flow of money that we are lending to private credit lenders,
24:15
Speaker 2: and we're going to be writing down the value of
24:19
Speaker 2: or marking down the value of the loans that they're
24:21
Speaker 2: telling us they have to restrict lending further. Basically, this
24:25
Speaker 2: is how Jamie Diamond became CEO of JP Morgan. He's
24:29
Speaker 2: a fantastic risk manager. He might have horrible instincts when
24:32
Speaker 2: it comes to whether or not there's a hurricane coming
24:34
Speaker 2: for the US economy four years ago, which we'll never
24:36
Speaker 2: let him live down, but he is a fantastic risk
24:39
Speaker 2: manager because he doesn't let the bank get into trouble.
24:43
Speaker 2: And look, if you read like headlines, basically every day
24:48
Speaker 2: you're seeing all kinds of things popping up in private
24:51
Speaker 2: credit right now, and quite honestly, it's like on a
24:56
Speaker 2: daily basis, the publicly traded stocks that are in that
24:59
Speaker 2: space are just bleeding blue outl just went below nine
25:02
Speaker 2: dollars a share today. To put this in perspective, that
25:06
Speaker 2: was a stock that was trading above twenty back in
25:10
Speaker 2: July of last year. So you're talking a fifty five
25:13
Speaker 2: percent loss in a span of eight months. And I
25:18
Speaker 2: don't know where any of this goes, but I've been
25:20
Speaker 2: saying for the last like five or six months that
25:22
Speaker 2: something stinks in the private credit space, and it's starting
25:26
Speaker 2: to stink in broader financial markets as well. Just like again,
25:32
Speaker 2: watch what's going on there where again you just see
25:36
Speaker 2: like even the big banks are starting to like bleed
25:38
Speaker 2: a little bit now when you're kind of like what's
25:41
Speaker 2: going on? Like, it never makes me feel good when
25:43
Speaker 2: I just see bank stocks selling off with no clear reason.
25:47
Speaker 3: Yeah, maybe there's something that we're not calling stuff. Because
25:50
Speaker 3: if you look at JP Morgan, for example, they have
25:52
Speaker 3: about twenty two billion of exposure allegedly to private credit,
25:55
Speaker 3: just nothing for them exactly. And that's where I was
25:57
Speaker 3: going with it. So why should I be overly concerned
26:00
Speaker 3: the financial sector which is compromised of goldmanzas, JP Morgan,
26:04
Speaker 3: Bank of America that have such muted impacts to private credit.
26:08
Speaker 3: It is a little peculiar that the financial sector has
26:10
Speaker 3: been off so much year to date when I would
26:14
Speaker 3: tell you just, hey, I'm not concerned about these big
26:17
Speaker 3: banks and their exposure to it because basically they've offloaded
26:20
Speaker 3: all of this sort of unrated and high yield debt
26:26
Speaker 3: has been really totally vacuumed up by private credit, and
26:30
Speaker 3: the only exposure that they have is to the loans
26:33
Speaker 3: that they've made to these private credit operators, but not
26:35
Speaker 3: the actual private credit loans themselves.
26:38
Speaker 2: You make a good point, So we haven't done this
26:40
Speaker 2: in a while, just because you don't really talk about
26:43
Speaker 2: year to date returns like a week end of the year.
26:45
Speaker 2: But now we're you know, two and a half months,
26:46
Speaker 2: and so it's you have like a little bit of
26:48
Speaker 2: a track reck that you can look at and be like, Okay,
26:50
Speaker 2: we're almost through Q one. What's the lay of the land?
26:53
Speaker 2: Best performing sector this year energy, no surprises, Energy up
26:57
Speaker 2: twenty four percent, and change worst performing this year.
27:00
Speaker 3: It's either tech or financials.
27:02
Speaker 2: It's financials down a little more than eight. You've got
27:06
Speaker 2: Tech is actually not as bad as you would think
27:09
Speaker 2: given how things have moved. It's down three ish. Yep,
27:12
Speaker 2: you know somewhere in that ballpark. Healthcare is also down
27:16
Speaker 2: one and consumer communication services down like a quarter percent
27:20
Speaker 2: or so. So it's just kind of been you know,
27:24
Speaker 2: it's been bad for financials at the point that I'm making,
27:27
Speaker 2: And I never like when financials are leading a market
27:31
Speaker 2: down because I'm just sitting there going, Okay, you're telling
27:35
Speaker 2: me something, but what are you telling me? Like, what
27:37
Speaker 2: do what do the people who actually know things know
27:40
Speaker 2: that I don't know, and the answer is I don't know. Folks,
27:46
Speaker 2: if you're concerned a little bit about what's going on
27:48
Speaker 2: in markets, or if you're not concerned and you just
27:49
Speaker 2: want a second opinion on things, the Armstrong Advisory Group
27:53
Speaker 2: has offices all throughout the New England region. We can
27:56
Speaker 2: even do virtual appointments if you don't happen to be
28:00
Speaker 2: in the New England region. But we can help to
28:02
Speaker 2: take a look at your portfolio, your financial plan and say, hey,
28:06
Speaker 2: here are the areas where you're well positioned, here's some
28:08
Speaker 2: weaknesses that you can clean up and come away with
28:11
Speaker 2: a plan for how to improve your finances over not
28:15
Speaker 2: just the next nine months of the year, but the
28:16
Speaker 2: next two, three, four, five years, the rest of your life.
28:19
Speaker 2: How do you build a better financial plan? Best way
28:23
Speaker 2: to get in touch with us go to Armstrong Advisory
28:26
Speaker 2: dot com. There's a button there that says get started
28:29
Speaker 2: and you can schedule a time to speak with someone
28:31
Speaker 2: from our team. Really easy to do. You can also
28:33
Speaker 2: call eight hundred three nine three four zero zero one.
28:37
Speaker 2: But whether you're nervous about what's going on in markets
28:40
Speaker 2: or the world right now, or you just chill it
28:42
Speaker 2: and maybe just want a quick check up, just to
28:43
Speaker 2: make sure that you're still all good. Free consultation available
28:47
Speaker 2: to anyone who wants one again. You can go to
28:50
Speaker 2: Armstrong Advisory dot com, click on that get started button
28:54
Speaker 2: and schedule time to speak with someone, or call eight
28:57
Speaker 2: hundred three nine three four zero zero one.
29:01
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:03
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:06
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
29:09
Speaker 1: your own financial, tax, and estate planning advisors before making
29:11
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29:15
Speaker 1: advisory services.
29:16
Speaker 2: Some good news for Oracle stock that has been beaten
29:19
Speaker 2: up pretty handily over the last six seven months since yeah,
29:24
Speaker 2: six months. Since early September, stock peaked about three hundred
29:27
Speaker 2: and forty bucks a share. It was down in the
29:29
Speaker 2: one thirty range as recently as two weeks ago, but
29:33
Speaker 2: rallying today after reporting a good quarter of earnings, suggesting
29:36
Speaker 2: that there's no concern at least for this quarter about
29:40
Speaker 2: you know, whether they're going to be able to grow
29:42
Speaker 2: their AI business with an insane amount of spending relative
29:45
Speaker 2: to their current revenue and everything. So good quarter for Oracle.
29:49
Speaker 2: Still doesn't really solve the long term concerns that you
29:52
Speaker 2: have based on the amount of money that they're spending,
29:55
Speaker 2: but does show hey, they're able to execute at least
29:58
Speaker 2: in the early stages of trying to expand their AI presence,
30:01
Speaker 2: and it's good to see from a company that had
30:05
Speaker 2: a lot of questions. And so the stocks responding was
30:07
Speaker 2: up around thirteen percent earlier in the day. As I
30:11
Speaker 2: look at it right now, it is up nine and change,
30:16
Speaker 2: which is still good.
30:18
Speaker 3: Yeah, it's all gonna come down to execution for Oracle.
30:20
Speaker 3: This is a step in the right direction where they
30:23
Speaker 3: raise their twenty twenty seven fiscal revenue. They have increased
30:27
Speaker 3: their backlogs in terms of what they have coming for
30:30
Speaker 3: future years, and they have continued to make progress building
30:34
Speaker 3: out their data centers, with ninety percent of them being
30:37
Speaker 3: ahead of schedule from a development standpoint. So, like you said,
30:41
Speaker 3: they are raising so much debt and equity over the
30:44
Speaker 3: course of this past year, no plans to increase it further,
30:47
Speaker 3: but they had announced fifty billion that was raised during
30:50
Speaker 3: twenty twenty six. So what it comes down to is
30:52
Speaker 3: when you raise all that money you have to execute
30:55
Speaker 3: with the debt burn that they have. This is a
30:56
Speaker 3: step in the right direction.
30:58
Speaker 2: Let's take a quick break. When we come back, we
31:00
Speaker 2: will do some stack roulette after this.
31:02
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32:15
Speaker 2: Paul, what do you got for stack Roulette check?
32:17
Speaker 3: Want to talk a little bit about AI, but specific
32:20
Speaker 3: to travelers and their use of AI. So the tourism
32:26
Speaker 3: industry or just the travel agent business has evolved significantly
32:30
Speaker 3: over time with the introduction of the Internet, and now
32:33
Speaker 3: it's taking on sort of the next paradigm shift where
32:37
Speaker 3: travelers are going to be heavily utilizing AI to try
32:40
Speaker 3: and build out the destinations that they may want to
32:43
Speaker 3: visit or specific local small businesses and locations that they're
32:47
Speaker 3: looking to visit in a specific travel vacation. And the
32:52
Speaker 3: interesting issue here is just this new focus on We're
32:57
Speaker 3: so accustomed to Google and the way that it ranks
33:00
Speaker 3: pages on their site when you're searching for, you know,
33:04
Speaker 3: top restaurants in Boston or whatever the case may be,
33:08
Speaker 3: and now it's a whole different businesses have to focus
33:11
Speaker 3: on this from the other end of things. Now, if
33:13
Speaker 3: users are going to be more focused on using AI
33:16
Speaker 3: search for travel and all sorts of other recommendations, how
33:19
Speaker 3: do you get that pre eminent listing on a large
33:22
Speaker 3: language model like CHECKTBT. And what's unfortunate about this is
33:28
Speaker 3: that some of those smaller businesses that perhaps aren't as
33:30
Speaker 3: a depth from a technologist standpoint, may miss out on
33:34
Speaker 3: not getting aggregated to be the top location somewhere. But
33:37
Speaker 3: this is still far off. It seems like this would
33:40
Speaker 3: be a prime error where you would just send to
33:43
Speaker 3: a large language model, Hey, I'm Chuck Sauta, and I've
33:46
Speaker 3: got this is my you know, primeers for this specific trip.
33:49
Speaker 3: This is where I want to go. I have kids,
33:51
Speaker 3: et cetera, to build out a trip for you. But
33:53
Speaker 3: it still seems like there's a lot of hallucinations and
33:56
Speaker 3: some issues that you're running into with these large leanings
33:59
Speaker 3: models here. So I got a trip.
34:01
Speaker 2: I've tried this and I did a couple things that.
34:04
Speaker 3: I was, Oh, yeah, you've got some weird stuff that
34:07
Speaker 3: came back to you, right, weird stuff?
34:09
Speaker 1: What no?
34:10
Speaker 3: They I think you mentioned this before that it's done
34:12
Speaker 3: a poor job.
34:13
Speaker 2: I've had mixed mixed responses, mixed to results. That's the
34:19
Speaker 2: word I'm looking for. Thank you. Uh So I had
34:23
Speaker 2: one where I was I'm getting older this year I'm
34:27
Speaker 2: gonna be turning forty. It's a big one for me.
34:30
Speaker 2: And so I was like, okay, do I want to
34:33
Speaker 2: plan Like, you know, I've got kids, so I can't
34:35
Speaker 2: do wait kind of like long trip without them. But
34:37
Speaker 2: you know what's like a two to three day trip
34:40
Speaker 2: that I could do that would be feasible. And I said, like,
34:43
Speaker 2: here's like the stuff that I'm looking for, you know,
34:47
Speaker 2: show me what you can do. And it actually did
34:49
Speaker 2: something that was really really cool. It put together it
34:54
Speaker 2: basically built like a ranking on like eight different things
34:59
Speaker 2: that I had fed in and ranked like all of
35:02
Speaker 2: these cities on like these different things like food and
35:05
Speaker 2: you know, specific like types of hotels that I might
35:08
Speaker 2: want to stay in like and I was like, oh,
35:10
Speaker 2: like this is cool, like travel distance from Boston, like
35:12
Speaker 2: ease of getting around, like cool sight seeing. And I
35:15
Speaker 2: was like, oh, like that's kind of cool. I could
35:17
Speaker 2: see how this is like really useful for trying to
35:20
Speaker 2: plan a trip. But then I also did one where
35:23
Speaker 2: I was like, Hey, maybe I want to go see
35:25
Speaker 2: like a really cool concert somewhere in the US, Like, Okay,
35:29
Speaker 2: show me the concerts that are scheduled for this weekend.
35:33
Speaker 2: And it made like three concerts UPO that just didn't exist.
35:37
Speaker 2: Like I'm looking around on the internet trying to find them,
35:39
Speaker 2: and I'm like, this does not exist, and you're telling
35:43
Speaker 2: me that it does.
35:43
Speaker 3: But you recognize the act that it was promoting.
35:46
Speaker 2: Yeah, Like I was like, oh, yeah, they had that,
35:47
Speaker 2: Like they had that show last year. It was like
35:49
Speaker 2: a big music festival. And then I went to the
35:51
Speaker 2: actual festival website and it was like, no, this has
35:54
Speaker 2: been canceled for this year and we're trying to get
35:57
Speaker 2: back on schedule for twenty twenty seven. And I'm like, okay, AI,
36:01
Speaker 2: Like maybe you're not you know, quite there. So again,
36:04
Speaker 2: I have some experience with AI and like settings where
36:08
Speaker 2: I'm like, my goodness, this is amazing and this is
36:12
Speaker 2: where we are going yep. And then I have others
36:15
Speaker 2: where I'm.
36:15
Speaker 3: Like Google's not that bad, you know.
36:18
Speaker 2: It's like okay, you know, I just don't know if
36:21
Speaker 2: that's gonna work. So I've kind of had both sides
36:24
Speaker 2: of it, and I've remained convinced because remember, here's the
36:27
Speaker 2: other thing. The models that we are using today are
36:31
Speaker 2: the worst we will ever use for the rest of
36:32
Speaker 2: our life. Yeah, Like if you used one three years
36:35
Speaker 2: ago and you were like, oh, this is stupid. Try
36:37
Speaker 2: one now if you haven't, and it'd be like, oh,
36:39
Speaker 2: like there's been some improvements. There still is a ways
36:42
Speaker 2: to go, but.
36:43
Speaker 3: With those new Ruben chips, yeah, they're only gonna get
36:45
Speaker 3: better and better. Yeah, significantly.
36:47
Speaker 2: I got to talk about dog poop. Tucker put this
36:51
Speaker 2: in the stack.
36:52
Speaker 3: That was my Monday afternoon.
36:53
Speaker 2: Yeah, the snow is gone, but there's dog poop everywhere.
36:57
Speaker 2: These removal services are scooping up the business. So look
37:01
Speaker 2: here in the Northeast, where our show is based, we
37:04
Speaker 2: got I don't know the exact total, but I think
37:06
Speaker 2: it's like around double the amount of snow that we
37:08
Speaker 2: normally get in a normal year. It's been fun. If
37:11
Speaker 2: you like the snow like me, it's been horrible. If
37:13
Speaker 2: you hate the snow, like Tucker and me and Paul,
37:17
Speaker 2: I hate it. If there's one thing we can all
37:19
Speaker 2: agree on, we don't like stepping in dog poop. And
37:23
Speaker 2: when it snows a ton in the Northeast or anywhere,
37:25
Speaker 2: people take their dogs out and the poop like falls
37:27
Speaker 2: down below the snow. In a lot of cases, they're like, well,
37:29
Speaker 2: can't do anything about it.
37:30
Speaker 3: I guess I won't be.
37:31
Speaker 2: Able to scoop it up. And now all that poop
37:33
Speaker 2: is coming home to roost because the snow is melted
37:37
Speaker 2: and you're walking down the street and oh, this is
37:39
Speaker 2: a problem. So you've got people going around that are.
37:44
Speaker 3: Again like American dreaming.
37:45
Speaker 2: There's a company called Scoop it Up that's charging customers
37:48
Speaker 2: forty five dollars for each bag of waste that's filled
37:51
Speaker 2: with one time cleanings in a bag just so you know,
37:54
Speaker 2: holds ten pounds of poop according to them. So hey,
37:58
Speaker 2: it's a good business if you can get it. You know,
38:01
Speaker 2: it's it's a whether human or animal, people are always
38:06
Speaker 2: gonna have to clean up poop. And so have at
38:11
Speaker 2: it like it's it's like haircuts. It's the biggest racket going.
38:15
Speaker 2: It just doesn't stop. Let's take a quick break. When
38:18
Speaker 2: we return tomorrow, we'll have more stuff to talk about
38:22
Speaker 2: then